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Kingsmen Creatives Ltd’s Latest Earnings: Is a 14.5% Fall In Profit a Sign of Darker Clouds Ahead?

Kingsmen Creatives Ltd (SGX: 5MZ) reported its fiscal first-quarter earnings yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

The business of Kingsmen Creatives is organized into four major divisions: Exhibitions and Museums; Retail and Corporate Interiors; Research and Design; and Alternative Marketing.

To learn more about the company, go here and here.

Financial highlights

Here’s a rundown on Kingsmen Creatives’ latest financial figures:

  1. Overall revenue for the first quarter was $51.9 million, down 3.9% compared to the same quarter last year.
  2. For the first quarter, profit attributable to shareholders had fallen by 14.5% year over year to $787,000.
  3. Consequently, earnings per share (EPS) had declined by 16.7% from 0.48 cents in the first quarter last year to 0.40 cents in the reporting quarter.
  4. For the quarter, cash flow from operations came in at just $111,000 with capital expenditures clocking in at $15 million. This meant that the corporate marketing outfit was free cash flow negative for the quarter. A year ago, Kingsmen Creatives had S$2.43 million in operating cash flow, S$878,000 in capital expenditures, and thus S$1.55 million in free cash flow.
  5. As of 31 March 2015, Kingsmen Creatives had $72.9 million in cash and equivalents and about $11.9 million in borrowings, giving rise to a net-cash position of $61 million. This is nearly unchanged from a year ago when the company reported a net-cash position of $62.4 million.

In all, Kingsmen Creatives had hit a speed bump in the first quarter of 2015 and even saw its free cash flow fall to negative territory. A good thing though, is that the firm’s balance sheet remains strong.

Operational highlights

For the first quarter of 2015, revenue from the Exhibitions and Museums division saw a year on year increase of 23.2% to $26.1 million. This was offset by a 22.4% fall in revenue to $21.5 million for the Retail and Corporate Interiors division. These two divisions make up the lion’s share of Kingsmen Creatives’ business.

The smaller Research & Design and Alternative Marketing divisions had a solid and poor quarter respectively. The former saw its revenue soar by 48.5% to S$3.09 million while the latter’s top-line sank by 60.6% to S$1.2 million.

What’s next for Kingsmen Creatives?

Kingsmen Creatives’ management team added the following commentary about the company’s future outlook in the earnings release:

“The Group is seeing a softening of the global economy, impacted by the slowdown of the Chinese economy amidst the continuing uncertainties prevailing in the European and American markets. These factors have had an impact on our 1Q 2015 performance. The Group will continue to monitor and adapt to changes in the market, offering effective solutions to help our clients, while staying relevant to market needs.

As at 30 April 2015, we have secured contracts of approximately S$204 million, of which approximately S$181 million is expected to be recognised in FY2015. Barring unforeseen circumstances, we expect FY2015 to be a good year.”

In its earnings release for the fourth-quarter of 2014, Kingsmen Creatives also commented that it had expected 2015 to be a good year. As we’ve seen, the company hasn’t gotten off to a good start in 2015. But, management stated in the earnings release yesterday that those numbers “are in line with the [company’s] overall expectation for the year.”

Foolish take away

At its closing price of $1.03 yesterday, Kingsmen Creatives traded at around 11.8 times its latest trailing earnings and has a historical dividend yield of 3.9% thanks to its annual dividend of S$0.04 per share in 2014.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.